Full Retirement Age (FRA)
Full retirement age (FRA) is between age 65 and 67, depending on your year of birth. The benefit amount is based on the Primary Insurance Amount (PIA) which is the monthly benefit amount at Full Retirement Age. If your Full Retirement Age is 66, but you started payments at age 62, it would result in a reduction of 25% of the amount that could be taken if you had started payments at age 66. This might be an appropriate decision if you have health issues that may result in a shortened life expectancy. If this is not the case, starting distributions early can result in much lower payout levels over a lifetime.
Conversely, delaying distributions beyond Full Retirement Age, can often result in larger lifetime payouts. In fact, if you wait until age 70 to begin distributions, the benefit would be 132% of the distribution available at Full Retirement Age.
Filing and Suspending
If you plan on delaying payments after Full Retirement Age, you should consider “filing and suspending.” In doing so, you are filing for benefits, but choosing to start payments at a later date. If you suddenly had a need for the money before the anticipated collection age, this would allow you to request back payments of all funds that would have been received if they had started collecting when you filed.
Filing and suspending could also allow your spouse to begin collecting spousal benefits at an earlier date. At Full Retirement Age, your spouse may be able to collect spousal benefits equal to 50% of your benefit. Your spouse could file for this benefit even if they suspend payments for their own benefits to a later date.
When Should I Start Taking Social Security?
The right time to start receiving benefits involves weighing higher benefit levels against nearer term income needs. The factors that determine the appropriate course of action can be very complex, but the consequences of making the wrong decision can have a significant lifelong financial impact.
Therefore, we believe you should have a serious discussion with your financial advisor before making a final decision. Social Security is often one of the primary sources of retirement income, and should be considered with “all the cards on the table” before taking action.
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